Competition – Christopher Nuttall

*Yes, I do remember I’m in the middle of a novel plotting workshop.  But today is a really bad day, as I won’t be home till late.  Fortunately I had a very good guest post waiting just such an emergency!*

Competition – Christopher Nuttall

Let me start with a modern-day parable.

Jill is the champion runner at High School – she leaves everyone else in the dust. One day, a newcomer – Jack – arrives and proceeds to beat her at her own game. Humiliated, feeling that she cannot improve her own performance, Jill goes to the coach and complains that Jack has an unfair advantage over her. The coach buys whatever argument she puts forward and insists that Jack tie his shoelaces together before starting the race. So, on the second race, Jack falls on his face while Jill races ahead …

… And, on the third race, Jack carefully ties his shoelaces together, then takes off his shoes and runs barefooted.

All right, Jill is Big Publishing, Jack is Amazon and the coach is every government regulator who can be convinced/bribed/threatened into enacting laws to uphold the status quo.

It’s natural, when you are at the top of your game, to fear and resent an up and coming new challenger. Everyone who reaches the very highest levels is afraid that someone stronger, smarter or simply more talented than themselves will come along and take their crown. Jill would probably not have disliked Jack so intensely, let alone set out to ruin his chances, if she hadn’t seen him as an irredeemable enemy. And Big Publishing hates Amazon with the intensity of a billion while hot burnings suns.

(All right, I exaggerate. A million white hot burning suns.)

The problem with Big Publishing (and Big Music, etc, etc) is that they settled into a comfortable pattern that didn’t include eBooks or self-publishing. Their system worked very well, for them; they might be in competition with other publishers, but they weren’t seeing any game-changing shifts in the publishing world.   Each publisher faced the same hard limits as the others. Authors were very limited in what they could do about it, unless they were Tom Clancy-level popular; Big Publishing used its dominance of the marketplace to keep the authors in line.

The internet and Amazon changed that, for reasons discussed before. Kindle not only gave the publishing world a whole new format to enjoy, it allowed thousands of new authors (such as myself) to bypass the traditional gatekeepers and put our works in front of the public. The stigma attached to self-publishing, which made a great deal of sense even a mere fifteen years ago, vanished. And Big Publishing hated it. Their readers demanded eBooks (and books were pirated when they weren’t legally available), while their authors saw a way to escape from their shackles.

But Big Publishing (with the exception of Baen Books) had lost the ability to adapt to game-changing shifts in the market. While Amazon and a host of small publishers surged ahead, Big Publishing tried its hardest to alternatively pretend that nothing had changed and trip Amazon up as much as possible. The results have been disastrous – for Big Publishing. Amazon is simply more adapted to the current conditions than any of the big publishers (again, Baen is an exception) and they have sacrificed the goodwill of millions of readers on the altar of refusing to recognise that the times they are a changing. They have forgotten the cardinal rule, when it comes to publishing, that the reader is always right. It is no longer possible to put out a book that ticks all the right boxes and expect it to do well. Nor is it possible to charge hardback prices for eBooks and expect to earn anything when outraged readers turn to piracy.

There is a strong anti-Amazon argument, put forward by Big Publishing and authors who are too closely tied to the big companies to break free, that left unhindered, Amazon will eventually become a monopoly. It certainly does dominate the EBook market. (None of the other eBook providers have anything like the reach of Amazon.) But part of the reason Amazon dominates the eBook market is, as I noted in my earlier article, is because it understands the value of eBooks and provides a platform for simple and straightforward self-publishing. Amazon has neatly bypassed the problem facing traditional publishing – that every author must be invested in by the publisher, which causes problems when that investment is not recouped – by reducing the companies costs to the bare minimum.

Indeed, I have no way to know for sure, but I would bet good money that Amazon Kindle actually makes some pretty solid profits.

It also has another advantage. Amazon can use Kindle to determine which works actually sell, then use those figures to offer writers better deals. In effect, Amazon has removed the gamble from the publishing industry. They can spot a self-published writer with a major following and give him a somewhat more traditional publishing contract. Big Publishing is reluctant to sign on new writers because there’s no way to be certain their books will sell. Amazon can tell who can sell books by allowing them to test the waters, at minimal cost to Amazon.

A fear shared by a number of indie authors is that, eventually, Amazon will grow so powerful that it will start to demand a bigger share of the profits from kindle books. Long arguments have already been written over the pros and cons of Kindle Unlimited – and fears have been aired, in many places, that eventually participation in the KU program will become mandatory. I suspect, based on my observations when KU first came online, that those fears are groundless (Amazon earns more from my books when they don’t join the program) but I could easily be wrong.

But the real question is just what Big Publishing can do about it.

The current Big Publishing model is simply unsustainable. Historically, publishers have done more than just print books and take most of the profits; they have provided editors, cover designers, marketing, etc. Now, I – a self-published author – can have all of those for minimal expense. An established author, looking in dismay at the steady erosion of sales and services from Big Publishing, has a great deal of incentive to go indie himself. He will look at his backlist, out of print because of ironclad contracts written before the eBook age, and grind his teeth in frustration when he looks at pirate sites and sees his otherwise unobtainable books available, for free. His inbox will fill with the ranting of his fans, who may love him but aren’t going to pay hardback prices for an eBook, or screams of outrage about DRM-heavy files that are practically unreadable. (Or insults directed at the idiot who edited his book; I’ve noticed a steady decline in editing standards over the last few years.)

And when he complains to his editor (who may not be the person who signed him) he will be told to STFU. I predict that Big Publishing will see a steady exodus of authors over the next decade or so, if nothing is done to stem the flow.

Saving Big Publishing – and preventing Amazon from gaining a complete monopoly, as monopolies are dangerous things – will require a complete reworking of the business model. (I leave the argument about this being a good thing or not to someone else.)

First, Big Publishing needs to put their professional authors first. These are no longer the days when authors can be practically enslaved by ironclad contracts. I’ve heard enough horror stories from older pros to make me very wary of signing a contract with any big publisher (except Baen).   It is probably unreasonable to expect 70% profits from hardback/paperback publishing deals, but publishers should make sure that authors receive a reasonable profit.

Second, Big Publishing should take a long hard look at the prices for eBooks. As I noted here, production costs for eBooks are minimal and hardback prices are unjustifiable (and serve as nothing more than an incentive to piracy).

Third, Big Publishing should set up its own version of Amazon Kindle.

Oddly, Big Publishing is in a position to set up a rival system that actually has a chance of competing on even terms. Big Publishing owns the rights to thousands of novels readers would like to see in e-format, after all. But there are limitations in the kindle system – MOBI files, for example – that would give Big Publishing an in. Amazon’s reporting system is infinitely better than any publishers, but it does have its problems. I’d like a system that told me just how many copies I’d sold of a particular book without forcing me to add them all up manually.

Another prospect for profit (and Amazon could do this too) lies with artwork. Searching for book cover artists occupies a considerable amount of time. Setting up an e-cover site would be a great boon for both writers and artists.

But the temptation to meddle would always be there.

You see, prior to the internet, book reviews weren’t crowd-sourced. It was hard, very hard, to get an objective review of a book. Amazon, again, bypasses the gatekeepers. Paid hacks might praise whatever work of liberal art Big Publishing might have allowed into print, but ordinary people might take a more sceptical view. Amazon does everything it can to uphold the integrity of its review system – some people say it goes too far – and rarely deletes a negative review. They can afford to allow it because, in the end, Amazon is mainly a middleman. Big Publishing will face considerable temptation to do otherwise.

I don’t know if these ideas will ever be used – I don’t know if Big Publishing is capable of adapting any longer – but they are food for thought. It is competition that drives us forward …

… And Big Publishing has forgotten how to compete.

34 Comments

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34 responses to “Competition – Christopher Nuttall

  1. Laura M

    Well said.

  2. Chris Nelson

    Amazon/ebook publishers don’t have to have the princely overhead of an NYC office with NYC expenses. When you can cut that inflated expense from the cost of a book, prices can drop and the authors percentage can go up.

    • BassmanCO

      Hell of a good point. Although I imagine rent in Seattle isn’t too cheap either. 🙂

      • Alan

        True, although of a magnitude lower. However, what does an e-book publisher really need? Server farms & office parks exist in other places that also have airports – e.g. Phoenix. No reason to be tied to one idea of where to do business.

  3. Uncle Lar

    Gee, you’d think that some publishing house would set up an on-line e-book store offering backlist works at modest prices. They could offer multiple formats for Kindle, Nook, HTML, and any other version readable on just about any device. They’d mint coin hand over fist. They could call the service something catchy like webscriptions. But no one has ever even thought about doing that now have they.
    Now allow me to turn the /sarc off and point out that Baen’s webscriptions was alive and well long before Amazon ever got into the book business. Which probably explains why none of the Big Five have made a serious attempt at copying Baen’s success. You see they hate Baen with the same passion they hold for Amazon. Could never figure out if it’s a product of their jealousy or their fear, either emotion based on an upstart operation that understands the market and succeeds while they are in the early throes of a death spiral.

    • Jackragnorak

      “You see they hate Baen with the same passion they hold for Amazon”

      I see a lot of Baen fans talk about Baen being disliked by Big Publishing, but never any examples. Can you point me that way? I’m curious.

      Thanks!

    • Anonymous Coward

      Wonder what would happen if someone (Baen, Amazon ?) offered to purchase rights to sell an author’s backlist (e-book form only) from the Big 5.
      Low risk for the author (any income is better than no income).
      Lowers ‘launch’ costs for the new owner (no editing expenses with a finished work, I presume).
      Big 5 gets rid of a product they feel has low/no value, but if they are wrong and e-book sales stimulate hardback/paperback sales, they still get some revenue they would not ordinarily see.

      • Ah. The big five won’t let their back list go. No matter how little they sell, many times the ebook royalties are risible if they’re specified at all, and in aggregate they have thousands upon thousands of titles. I firmly believe it’s what’s keeping them afloat now.

        • Paul (Drak Bibliophile) Howard

          Nod, many of H. Beam Piper’s books are still held by Ace? and haven’t been printed or in eFormat.

        • Albert

          Which is yet another reason to never write for anyone but Baen. And since Baen is so heavily overworked, it’s gotta be indy.

    • I think at first it was contempt for Baen, since Jim Baen (PBUH) published those icky mil-sci-fi books and was not in NYC, and had (IIRC) not been part of the NYC in-group at any time. Then it was over-confidence (“He’ll go broke,” “E-books are a fad”), now I think it’s a combination of excessive momentum (“we’ve always done it this way”) combined with willful blindness (like the Mad Hatter buttering the watch, “But I’m using the best butter!”)
      Just my $.20 ($.02 adjusted for inflation)

      • Alan

        Backside of this: Amazon lost money for years, investing heavily in IT tech, and learning what it takes. It might be scary for even a major publisher to think about having to replicate that effort, even now that they can rip off a successful meme, to do their own.

        And of course, the longer they dither, the more certain their own death spiral becomes.

        • Draven

          of course, teh great irony is is they wanted to they could do it with no IT (hardware) investment , by setting up their servers on AWS.

  4. Farley

    The Big 5 have steadily reduced any real value delivered to their mid-listers, to the point where quite a few have left the fold for indie. These are people with solid track records of good but not great sales, people with dedicated but not huge fan bases. They don’t get the support they need from the publishers because they’re not on the mega-seller lists, so their new books take forever to get published, and then are published with minimal copy-editing and publicity, making sales anemic.

    So when their contracts run out, they pick up their fan base and go indie, and their income and sales RISE.

  5. I don’t think most of the folks at the Big Five live in the real world anymore. They live in very nice houses, and live in a very well paid lifestyle, while their authors (unless they’re a Tom Clancy or Stephen King) live in dirt poor ones, making maybe ten to twenty thousand dollars a year. Even though their books bring in hundreds of thousands for the publisher.

    Like kings ruling over their serfs, they are afraid of change, because they are afraid of losing their position at the top of the pyramid. They have all grown up living a life of power and splendor and believe they are royalty, and that the serfs can ‘just eat cake’.

    That is why they’re going to fail, and someone with more brains is going to come along and buy up the bones of their companies after they fail, and then make money off of that backlog. Like Turner did with Turner Classic Movies.

    Just wait.

    • Laura M

      Finally, the means of production are in the hands of the workers. (I just kind of love saying that.)

      • Funny thing is, I don’t think most Marxists envision rampant entrepreneurialship and so many very independent individuals.

        • Uncle Lar

          Ah, you see classic Marxism denies human nature, the desire to do well for yourself and better for your children. Indie is taking off because it literally does put the power in the hands of the creative artist.

        • Albert

          Going by Marx himself, the whole idea is designed to put power into the hands of the central committee and their commissars. Letting the workers actually make their own decisions runs the risk of some of the workers making badthought decisions.

  6. Alan S.

    Add the textbook industry fiascos in too. $100 to rent a high school textbook for a year, $250 to buy. The -epub-. For -Calculus-.

    The list of problems with that is quite long.

    • The Other Sean

      You’d hope it would include a lot of problems for that price. 😉

      • Alan S.

        I was underwhelmed. Of the 7 Calculus textbooks in my house, I’d rank it … seventh for the value proposition. And one has stains I keep telling myself are just mold. Indexes, review pages, and a solid, dense, integral table aren’t trumped by this year’s cover art.

  7. Bob

    And the next week, Jack and Jill are dating.

  8. While it’s not impossible for the Frumpy Five to carve out an niche, they can forget going head-to-head with Amazon now. Even if they get a clue, Amazon has already established itself as the e-book vendor, and that’s not going to go away overnight. This means they must above an Us or Amazon choice, and instead opt for a Us and Amazon. This means forgetting about marketing their own e-reader, because it would be surprising if Amazon would recognize them for, and unless they can run Kindle books, they’re just going to fizzle.

    I’m not even sure if their own app would work, though that would be more cost effective, but I doubt Amazon would allow a Calibre type solution for direct sales. So readers would have to have the Amazon app and the hypothetical app on the same device, and that automatically cuts out Kindle e-ink readers.

    The most viable solution would be to go DRM free, like Baen and Tor. This would allow books to be read on existing Kindles. The only issue will be those users who aren’t tech savvy, and would prefer to just buy it through the Amazon Store than to try to download it and transfer it over. And Amazon would immediately match their price if they decided to lower it, eliminating that advantage.

    All of this will come to naught if they don’t give customers a reason to buy their books. If they had, they wouldn’t be in this fix now. For customers to want to buy their books, their imprints are going to have to mean something again. For authors to want to do business with them, the Frumpy Five are going to have to provide a better service than Amazon, or services that authors want such that they’re willing to take a royalty cut.

    What might work is to provide a la carte structure for authors: 60 percent if they think the work is up to their standards, with decreasing royalties for editing, formatting, and cover for X number of sales, until the company recoups a set cost. If the imprint meant something, authors might go for 60 percent verses 70 if they thought they’d make up the difference in sales.

    Since traditional publishers haven’t even figured out that their e-books are too high, and haven’t seemed to figured out formatting, I don’t have high hopes they’ll make it through this. Not that I care. I am surprised no on trimmed from their rosters has done something similar to capitalized on e-book sales.

  9. Jeff Duntemann

    There is something called the channel-capture effect, which is a term from electrical engineering. In certain types of signal modulation, the strongest signal “captures the channel” and weaker signals are not heard at all. Amazon has basically captured the ebook channel, and even competitors who understand what ebooks are about (like B&N) have little presence in the ebook market. I sell twelve books on Amazon to every one I sell on Nook.

    Now turn it around and ask how a group of publishers who don’t even understand ebooks can have any presence in the ebook channel at all. I’m not sure they can. One reason they can’t is that Amazon is not a publisher. Amazon is a retailer. They set up stores and cash registers. For the most part (and this could change) they don’t manufacture what they sell. *Publishers are not retailers.* I don’t think they have any least concept of what it takes to sell ebooks (or anything else) on the scale that Amazon does.

    This is not entirely the publishers’ fault. I was in publishing for a long time, and there was a very strong but unwritten rule that publishers could *not* sell at retail. My company provided some very necessary cash flow for itself by selling its books “mail order” out of ads in the back of the magazine that we published. We caught holy hell from retailers all the time for that, because we were competing with them. (This even though they took their sweet time–up to six months–paying us for the books they ordered.)

    The current publisher-retailer ecosystem on the print side is *brittle,* by which I mean that it is so old and ingrained that its participants literally can’t imagine it working any other way. Furthermore, when it fails, it will fail catastrophically.

    That failure is well underway. I’m not sure how it could be prevented. I’m not sure it should be prevented. I’m not sure what the industry will look like when it’s over. I am very glad, however, that I switched to indie publishing when I did.

  10. Great post, Chris. I have a couple of things to add, though. I’ve been tracking the science fiction bestseller charts on amazon.com for several years and have recently been blogging about what I’m finding there. The situation is changing rapidly. In the past few months, Amazon has been pushing their own imprints much more heavily, and with a lot of success. Right now in the Kindle science fiction top 20, five of the books are published by Amazon imprints. Amazon’s imprints have done well for several years (Marko Kloos is just one example) but there’s been a step change over recent weeks.
    The other thing I’ve noticed is how hard Harper Voyager has been trying to steer the ship around, last year taking on David Pomerico from 47 North at the helm. Once of his first acquisitions was Jay Allen, who will be familiar to military sf fans. They acquired AG Riddle too. It’s competition waking up for the likes of you and me, but I’m pleased that Harper Voyager has recently announced an open submission for novels and is specifically asking for military sf. Before the Kindle changed everything, that would have been inconceivable from a top5 publisher. Interesting times!

  11. JT

    Interesting post!

    In Germany, publishers have followed one of your suggestions and started their own competitor to Kindle, called Tolino. It’s been moderately successful (35% of the German mkt, according to their numbers in http://the-digital-reader.com/2014/10/10/tolino-aka-germanys-answer-kindle-expands-italy-netherlands/). It’s more expensive than the kindle (isn’t kindle a loss leader in the usa?) and not very well marketed – possibly because it’s German (I’ve lived here for 10 years and Germans just are not good at marketing). Of course, the market here is very different, as Germans read more than Americans but laws here prevent(ed?) the kind of discounting that American readers love and American publishers (and, I’m betting, writers) hate. “Hardcover prices” are standard here — even paperbacks are often 10 Euro.

    As for exorbitant pricing on ebooks, it’s a young market and intelligent publishers are testing and tracking (if they’re not, Amazon most definitely is). Eventually, they’ll learn the correct price points for various books and will adjust accordingly. Or they will be replaced by publishers (possibly amazon, google, apple, etc.) that can pick better price points.

    However, publishers will ALWAYS have higher costs for the same level of service as self-published — not every book is a success (even at Baen or Tor) and the successful ones subsidize the costs of less-successful ones. The only way to change that would be to eliminate advances and make editors paid by the book/sale — i.e., self-publish.

    And,Tim, you need to remember that Amazon sales charts are a) not necessarily accurate (until there’s an outside audit of the system, it’s an easy one to game) and b) amazon controls the on-site promotion, meaning that any click-through sales are influenced by what amazon chooses to promote. They are promoting the product that generates the greatest expected PROFIT FOR AMAZON. This is not the same as the product most likely to sell.

    • “They are promoting the product that generates the greatest expected PROFIT FOR AMAZON. This is not the same as the product most likely to sell.” — yep, this sure makes them different from traditional publishers, who infallibly promote the most politically correct/likely to bring them prestige product over what the readers would want.
      As for writers hating discounts — no, not really. Discounts spread the readership, and the smart writer knows the virtues of publicity.
      Oh, and as for Americans reading less than Germans: I wouldn’t bet on that. Americans read less in public, because Americans are in public less. Statistics are suspect and in Europe often self-flattering.
      What we’re finding with indie is that people read a lot more than the traditional publishers thought. Possibly because now they have access to what they want to read.
      Oh, and btw, I wouldn’t count on the big five gathering data on anything. I’ve worked for/with them for a decade and a half and gathering data doesn’t seem to be one of their concerns. They’re not even sure how many of each book they sell. I know this sounds insane, but I assure you it is true. It’s all “estimates.”
      So, your thesis is pretty, but doesn’t apply… to pretty much anything.

    • JT, a couple of things. First, if you are going to cast doubt on Amazon tracking sales, be sure to do the same for traditional publishers. They are the ones that use BookScan to do handwavium to determine sales numbers to report to their authors. Sorry, but in this day and age of technology, RFID, etc., there is no reason a publisher shouldn’t be able to accurately — at least more accurately than BookScan — the number of books printed, shipped, sold, and returned. Instead, they use a system that is, at best, under-reporting by at least 30%.

      With regard to your comment that this is a young market and intelligent publishers are tracking, I have to disagree. For one thing, the market is young only in relation to the age of the current print market. It has been around for almost a decade — with e-books being around longer than then but without a major outlet except for a few pioneers like Baen. That is more than enough time to start to get a figure on what readers are willing to pay.

      But the truth of the matter is the Big 5 aren’t worried about anything but how much money they are going to bring in. They think they will earn more by charging higher prices even though they will lose sales (something there is more than enough data to back up. All you have to do is look at their sales figures for the last five years).

      All you have to do is look at the sales charts, updated hourly, on Amazon to see what books are selling and where they are coming from. Even the best sellers list has a large percentage of indie and small press published books. Still, the traditional publishers, namely the Big 5, turn a blind eye.

      Nor does anyone expect a publisher or a writer to hit it out of the park every time. But we do expect to be treated like we are intelligent, discerning readers who know what we want and know what we are willing to pay. We don’t react well when publishers tell us that they have to pay for editing multiple times simply because a book is being publishing in multiple formats. We know that a cover isn’t paid for three times — once for hard cover, once for paperback and once for e-book. Yet, one major publisher has told us that, and other one time costs are actually costs per edition.

      Finally, as a writer, I have no problem with a reasonable discount for my work. Why? Because I know it offers the opportunity for new readers to discover my books and then tell their friends about it. Of course, I also believe in the Baen model of give them the first taste for free. Something else most traditional publishers don’t get.

  12. JT

    Amanda, I didn’t cast doubt on the trads’ numbers bc I assumed that people reading this blog would’ve seen the same posts I have about the inaccuracy of their data. I treat their numbers as, at best, solid guesses.

    As for the ebook market being young, ebooks were very much a tiny niche market until ereaders took off around the time of the kindle (and, I assume, later with tablets). Being around “but without a major outlet” is what makes it young. Once there’s a major market, the changes are accelerated. Once that acceleration slows, the market will be mature. At that point, you’ll see either a monopoly (which we’re close to) or several competing outlets with very similar business practices (which Baen shows is not the case, even in SFF).

    • JT

      Oops, forgot to add, I think your stance on discounts is very reasonable and would be one I’d share (if I were an author). But I’ve read comments by enough authors to know it’s not universal. And Baen’s “give them a taste for free” is pretty common now on Amazon — you can usually (at least on the books I’ve checked) read the start or other excerpt for free. It’s not identical to Baen’s method, but the general idea is pretty accepted, I think. And, of course, Tor and others often give sample chapters for free to online outlets. I’d be surprised if this isn’t standard practice for almost all books in the near future. Those that don’t will be like movies not released for review until the release date — probable duds.